| Here are the definitions to help evaluate vehicle | | | | exploit this anomaly in vehicle residual values in a |
| residual values | | | | Lease calculationThe easy way |
| Vehicle residual value | | | | On the Internet, search for any manufacturer's web |
| This is the value that the manufacturer, not the dealer, | | | | site and simply find a lease payment by focusing on |
| says the car will be worth at the end of the lease. | | | | any higher quality car costing a few thousand collars |
| Sometimes it is a percent, such as 60% of the MSRP, | | | | more than your initial choice. Ignore the fact that the |
| the price of the car. A $20,000 car with a 60% vehicle | | | | residual value is not given. What you're really after is a |
| residual value would have a residual value of | | | | monthly lease payment on a Vehicle B that is the |
| $12,000.The lease contract says you can rent this | | | | same, or almost the same, as the lease payment on |
| $12,000 for x years by simply paying a percent, such | | | | the initial vehicle A that you chose.The hard way |
| as 4% of the $12,000, or .04 times $12,000 divided by | | | | To narrow your search for a secondary choice, be |
| 12 months or $480/12 equals $40/month Amortization | | | | sure to limit it to a vehicle that has a higher residual |
| The $8,000 left (the $20,000 car price minus the | | | | value percentage. Because few car manufacturers will |
| $12,000 residual value) is a standard loan, just like a | | | | provide the residual value on the Internet, go to other |
| house mortgage, which requires a monthly payment | | | | sites that do offer this information. To get the |
| for not only the interest but also a little of the $8,000. | | | | percentage residual value, divide the vehicle residual |
| This will always be a much larger payment than the | | | | value by the MSRP and you have the percent. |
| interest paid on the residual value. | | | | Example: 12,000/20,000 equals 60%.After initially |
| | | | deciding on what car to lease, get a lease proposal on |
| Here is where the magic is | | | | a different make that costs as much as $5,000 more. |
| Higher quality cars, such as a BMW or Mercedes or | | | | You can do a lot of this secondary searching on the |
| Lexus, will always have a higher relative vehicle | | | | Internet. Make sure each choice has similar features |
| residual value than a Chevy or Pontiac or Dodge. That | | | | and that neither one is loaded with a lot of optional |
| means that although the interest paid on the higher | | | | accessories. |
| quality vehicle residual value is more than that paid on | | | | |
| the lower quality car, the monthly payment paid on the | | | | The next step is to actually visit the second choice |
| depreciation is a lot less, so that the sum of the two on | | | | dealer showroom and see if Car B meets your needs, |
| a BMW can be the same as the sum (the lease | | | | such as comfort, room, and any other requirements |
| payment) on a lesser quality car.Use the resource box | | | | that led you to pick vehicle A in the first place. Ignore |
| at the end of the article to see an actual example of | | | | its price, because you're only concerned about its |
| two vehicles having the same lease payment but | | | | monthly lease payment. |
| differing in price by several thousand dollars.How to | | | | |